Manchester City's summer preparations were thrown into disarray last night when Claudio Ranieri, who had been lined up to take over as their new manager, opted instead to join Juventus.

Ranieri's decision leaves City back at square one in their search for a replacement for Stuart Pearce and has caused dismay for the club's prospective new owner Thaksin Shinawatra. Thaksin and his advisers believed they had an agreement in place for Ranieri to take the job as soon as the deposed Thai prime minister completed his takeover of the club. However, Thaksin's inability to seal the deal quickly has allowed Juventus to gazump them, leaving City managerless at a time when other Premiership clubs are already well down the line in terms of bringing in new players and preparing for next season.

Already this summer City have lost their influential defender Sylvain Distin, who has joined Portsmouth on a free transfer. Their midfielder Joey Barton was in Newcastle yesterday and is expected to seal his £5.5m move to St James' Park this week, despite late interest from West Ham United. There are also doubts about Micah Richards' position at the club, with the teenage England international known to be considering his future.

Thaksin's representatives have indicated they still want to appoint a foreign manager and Gérard Houllier's name is bound to come up after his recent departure from Lyon, as will that of Juande Ramos at Sevilla. Houllier is known to be keen, although Thaksin's people gave him little consideration when they made Ranieri their first choice in a process that has dragged on far longer than anticipated.

The 55-year-old Italian was unveiled at the Stadio delle Alpi yesterday as the replacement for Didier Deschamps, Juventus proclaiming that "with Claudio Ranieri, a season with a wealth of ambitions and new opportunities opens up". Whether anyone at the City of Manchester Stadium is so triumphant after their eventual appointment remains to be seen.

"It is a beautiful, difficult and electrifying challenge," Ranieri said. "I like electrifying challenges. There is hard work to do to recover the position Juve are used to. It is an ambitious project but I am sure we will do well. The fans are calm and we will make them proud of what Juve will do in the grounds of Italy for the moment and then in the grounds of Europe."

He added: "It was difficult to say no to the big project at Manchester City but the team has not [been] taken over yet and for me I cannot wait for one week more."

Ranieri signed a three-year contract in Turin, with a salary starting at £550,000. The club chose him after he steered Parma to survival on the final day of the Serie A season but even so they would apparently have preferred to appoint another former Chelsea manager, Gianluca Vialli, only for their former player effectively to price himself out of the job by demanding at least double Ranieri's wage. With Juventus set for a major squad overhaul before their return to Serie A following their punitive relegation a year ago, they clearly felt the money would be better spent on transfers. Instead it is City who might be left counting the cost of their failure to secure their first choice.

City's current hierarchy are dismayed the matter is still up in the air although they were never particularly keen on Ranieri. Alistair Mackintosh, the chief executive, would prefer a British manager but the takeover talks have been at such an advanced stage he has already been taking instructions from Thaksin's advisers.

Mackintosh's own short list would have Billy Davies at the top, after he guided Derby County into the Premiership, and City are aware that the Scot has unresolved issues with the board at Pride Park.

However, Mackintosh and his colleagues are in the awkward position of having to wait until the drawn-out takeover process is completed before they decide how to retrieve an increasingly embarrassing situation.